Activists Work to Stop Tax-Exempt Donations to Israeli Settlements

Activists in the US are working to cut to the flow of tax-exempt donations to Israeli settlements in the occupied West Bank. (Alice Speri)

As Israel’s illegal settlement enterprise in the occupied West Bank continues to be a strain on US-Israel relations, an unflattering light is being shone on US private donations towards the development of the settlements that are increasingly encroaching on Palestinian land.

Most of the construction work in the settlements is in the hands ofPalestinian land. Much of the money needed for settlement development comes from private American donations. It is estimated that tens of millions of dollars reach the settlements in the form of charity, contributions that by virtue of their philanthropic nature enjoy tax-exempt status under the US’ Internal Revenue Code.

An examination by this writer of IRS documentation led to at least 32 organizations registered in the US as tax-exempt charities that support Jewish settlements in the West Bank including East Jerusalem with sizable financial contributions (“From New York to the West Bank: Following US Tax Dollars into Israel’s Settlements“). The groups, mostly Jewish but also Christian-Zionist, often adopt a particular community of settlers and for the most part claim on their tax forms to be contributing to charitable or educational projects.

The non-profit status some of these groups enjoy as designated 501(c)(3) organizations under IRS regulations implies an official US government recognition of their activity.

Some civil rights activists argue that private American funding of the settlements, while not necessarily illegal, does contradict stated US foreign policy as well as the government’s commitment against racial discrimination. But others have started to accuse organizations registered as 501(c)(3)s and supporting settlements of repeatedly violating US tax laws.

“The United States does not accept the legitimacy of continued Israeli settlements,” US President Obama said in his celebrated Cairo address to the Arab and Muslim world in June 2009. “This construction violates previous agreements and undermines efforts to achieve peace. It is time for these settlements to stop.” Obama’s statement echoed those of previous US administrations, which have alternated in calling Israeli settlements “illegitimate” and “unhelpful.”

Last November, Israeli Prime Minister Netanyahu agreed to a ten-month settlement freeze — with the exception of East Jerusalem — in order to resume peace talks. In January 2010, however, he also announced that the Etzion settlement block, south of Jerusalem, “will be an inseparable part of the State of Israel for eternity.” Several news outlets continue to report that construction has yet to stop even in areas where the Israeli government has mandated a freeze.

Meanwhile, US aid to Israel — the billions of dollars per year from the government as well as private donations — continues to flow unabated.

According to a July 2009 report by the International Crisis Group, the Hebron Fund rises an average of $1.5 million a year to support Jewish settlement in the West Bank city of Hebron. The 700 Jewish settlers in Hebron, under the protection of the Israeli army, routinely physically harass the Palestinian community in the West Bank town and push them out of their homes.

The solidarity group Adalah-NY, based in New York City, mobilized to protest the Hebron Fund annual fundraiser at the Mets baseball team’s CitiField last year. While Adalah-NY and the ten other groups that mobilized against the fundraiser were not able to get it cancelled, the effort was only the beginning of a larger campaign against the flow of US dollars into Israeli settlements.

Born to a Canadian father and an Israeli mother, Neil Strauss, who goes by a pseudonym, grew up between Canada and Efrat, one of the largest settlements in the occupied West Bank. Today, Strauss is a legal researcher for the Washington-based American-Arab Anti-Discrimination Committee (ADC) and a supervisor of the Free Palestine subcommittee of the National Lawyers Guild, the nation’s first racially integrated bar association, which is committed to civil rights and social justice.

Strauss runs workshops inviting volunteer law students to look for violations of tax regulation, rather than broader political questions of international law, although he does stress that settlements and settlements support are contrary to both international law and American public policy.

“The IRS is staffed by professional tax people and bureaucrats are less susceptible to Zionist political pressure than elected officials,” he said, explaining that turning to the IRS is “easier than challenging support to Israel, which is a political issue.”

Since March 2009, the ADC has filed official complaints to the IRS — accompanied by copious documentary evidence — exposing what it claims are illicit practices by ten of these organizations. They now hope the IRS will audit the organizations in question.

“The law is pretty clear,” Strauss said. “If these laws were applied honestly, these organizations would not have tax exemption.”

According to IRS regulations, in order to obtain 501(c)(3) tax-exempt status, an organization must set forth “charitable, religious, or educational purposes,” including “lessening neighborhood tensions, eliminating prejudice and discrimination, defending human and civil rights.” The ADC argues settlements do just the opposite.

Furthermore, a charity “may not be an action organization,” meaning it must not engage in “political activities.” A 501(c)(3) can also be disqualified if it engages in propaganda or if it operates in ways that do not pertain to its stated purposes.

The ADC also maintains that some of these organizations may be guilty of fraud and misrepresentation when they claim they operate in Israel but in fact operate in the West Bank and when they state charitable purposes when they actually buy military equipment and train paramilitary organizations.

“The smallest goal is to get their tax-exempt status removed,” Strauss said. “If that happens people will continue donating to the settlements but the amounts will be smaller because the donor will have to pay taxes on it and the organization will have to pay taxes on the income.”

For smaller organizations, the removal of the tax exemption could be fatal.

“Some organizations would die without it, especially in these days that donations are down,” Strauss said. “Others would see a reduction in income.”

The ADC is also hoping that larger, wealthier charities, such as the Jewish National Fund, which operate both in Israel and the occupied West Bank, will end their activities in support of settlers in order to protect their exemption.

The ADC claimed its first success in January 2010, when IRS Commissioner Douglas Shulman told National Public Radio that if the IRS did find these organizations to be breaking tax law, it would disqualify them from exemption, as it does many organizations every year. Some, however, argued Schulman’s statement wasn’t quite as resolute as the ADC later implied.

In addition to Adalah-NY and the ADC, at least five other organizations have formed a coalition against American support of settlements.

Among their complaints is the US government’s reluctance to deal with groups they say are in flagrant violation of stated US policy and the double standard applied to US-based Arab and Muslim charities. For example, the Holy Land Foundation, the largest Islamic charity in the United States, was shut down in 2007 on the grounds that funding it raised ended up in the hands of Hamas, which the US lists as a terrorist organization.

Hebron Fund, Mets Demo, 11/18/09

Adalah-NY members say the double standards are blatant and refer to the case of Noam Arnon, a spokesman of the Hebron Jewish community and an honoree at the 2009 Hebron Fund dinner.

“Noam Arnon openly praises the murder of Palestinians and praises individuals like terrorist Baruch Goldstein,” Andrew Kadi, a Palestinian-American member of Adalah-NY, charged, citing a report by the Associated Press.

In 1994, Brooklyn-born doctor Baruch Goldstein entered Hebron’s Ibrahimi Mosque and opened fire, killing 29 Palestinians gathered for Friday prayer, before being lynched to death. His burial place in the nearby settlement of Kiryat Arba became a site of pilgrimage honored by many, including Noam Arnon, until the Israeli high court ordered the shrine to be removed, enforcing an Israeli law against the building of monuments for terrorists.

“Look at the statements made by Noam Arnon,” said Ethan Heitner, an activist with Adalah-NY. “Can you imagine a Palestinian making these statements that is affiliated with a US 501(c)(3)? They would get shut down immediately.”

While non-profits funding settlements have operated under the radar for some time, the case can no longer be made that their work is unknown to government. “I think there is a lot of willful blindness,” Heitner said.

Some of these organizations in fact do more than collect contributions and have become vocal in their challenge to the Obama administration’s position on settlements. For example, the projects of the One Israel Fund range from sponsoring “defense equipment” and a Tactical Response Team of volunteers trained to respond to terrorist attacks to covering wedding expenses for settlers who lost their homes when they were evicted from Gaza.

“Next on the chopping block: Judea and Samaria,” is the title of one of the Fund’s fliers, which quoted President Obama’s remarks about settlements at his Cairo speech. “We’re used to hearing the same old rhetoric from politicians: obstacles to peace, painful concession,” the flier continues, soliciting donations. “Now we have a new buzzword: illegitimate. The only thing that doesn’t seem to change is the terror.”

Another such group is Shuva Israel, The Return to Israel Fund, a Texas-based 501(c)(3) of “Evangelical Christians Lovers of Zion.” “What is our response to President Obama’s pressure on Israel to freeze building in the communities of the Biblical Mountains of Judea and Samaria?” the group asks in gigantic font on the homepage of its Stand with Israel campaign. A link leads to the answer: “Become part of 12,000 Christian Zionists to sign up and give $12 a month, equaling $144,000 monthly to support the Jewish community settlements in the eternal biblical heartland of Israel.”

If the spirited level of fundraising by such groups says anything, it is that settlers and their American supporters do feel threatened and do fear they are running out of time. While, even pre-recession, charitable donations in general were declining, many pro-settler groups have had their contributions increase remarkably. Construction and expansion of the settlements, too, has been bustling, the Israeli group Peace Now reports, something confirmed by settlers themselves.

Double standards aside, what the activities of settlement supporters have exposed is the inconsistency between stated US foreign policy and the administration’s capacity to enforce that policy, not only overseas but first and foremost at home.

Alice Speri is a freelance journalist who has worked for Al-Jazeera English, Agence France Presse and The Christian Science Monitor. She is currently based in Port-au-Prince, Haiti and has previously lived in Jenin and Ramallah. This story is adapted from her year-long research project on US-funded settlement expansion.